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Press Releases

September 9, 2015

Signing of Japanese ODA Loan Agreement with the African Development Bank Group: Accelerating Economic Growth Led by the Private Sector

photoAfDB Vice President Finance Charles O. Boamah (Right) and JICA Vice President Hiroshi Kato (Left) shaking hands after signing
photoAfDB President Akinwumi A. Adesina (Left) and JICA Vice President Hiroshi Kato (Right) at the ceremony

On September 8, the Japan International Cooperation Agency (JICA) signed a loan agreement with the African Development Bank Group (AfDB) to provide loans of up to 35.88 billion yen for the Private Sector Assistance Loan under the Joint Initiative titled EPSA for Africa (VI).

This is the sixth Japanese ODA loan to the AfDB’s Private Sector Financing Operations [1] as a part of Enhanced Private Sector Assistance for Africa (EPSA for Africa). With the objective of promoting private sector led economic growth and poverty reduction in Africa, JICA will provide the loans to support project financing for infrastructure, agriculture and private enterprises in AfDB member countries [2].

Although the average annual rate of economic growth in African nations was 3.9 percent in 2014 and is expected to be 4.9 percent in 2015, diversification of the economy and increased investment is needed to sustain growth. In addition, the high unemployment rate, particularly among the younger population, is growing more serious each year. Therefore, the continent needs a more robust and sustained economic growth supported by an active private sector that creates employment. However, the public sector alone cannot fill the vast infrastructure gap due to its financial limitations. Also, micro, small and medium enterprises (MSMEs) in Africa experience difficulties in accessing financing from financial institutions. Given these circumstances, in June 2013, the Fifth Tokyo International Conference on African Development (TICAD V) adopted the Yokohama Action Plan (2013–2017) [3] that stipulates, among other policies, the promotion of trade and investment in infrastructure and agriculture with active participation by the private sector.

The Private Sector Assistance Loan under the Joint Initiative titled EPSA for Africa (VI) is the sixth round of financing to support the burgeoning financial needs of the private sector [4]. The previous five rounds of loans supported financing to SMEs through local banks, the expansion of gas thermal power station project, and the financing of export-led industries through sub-regional development finance institutions, thereby promoting industrial development and creating employment with a high level of success. This round is aimed to further support the growth of the private sector through infrastructure and other projects in African countries.

Reference

1. Terms and Amount of Loan

Project title Amount
(million yen)
Annual interest rate (%) Repayment
period
(years)
Grace
period
(years)
Procurement
Project Consulting services
Private Sector Assistance Loan under the Joint Initiative Titled EPSA for Africa (VI) 35,880 0.55% - 40 10 Untied

2. Executing Agency
OPSM: Private Sector Department, African Development Bank
Address:
Immeuble du Centre de Commerce International d’Abidjan (CCIA)
Avenue Jean-Paul II 01 BP 1387- Abidjan 01 Côte d'Ivoire
Phone: +225 2026-1285

Notes:
1: EPSA is a program implemented through financing and technical support, and JICA carries out the financing portion. There are two financing methods used: 1) Accelerated Cofinancing Facility for Africa (ACFA) with the AfDB funds for governments, government agencies and others, and 2) private sector assistance financing (this initiative) under the EPSA.

2: During the Gleneagles G8 Summit in 2005, the Government of Japan launched EPSA with AfDB and announced Japanese ODA in the amount of 1 billion US dollars equivalent. At the Camp David G8 Summit in 2012, stimulating private investment in Africa was discussed as an on-going pressing challenge. At the subsequent G20 Los Cabos Summit in 2012, Japan made a commitment to provide an additional 1 billion dollars equivalent in ODA loans over five years. In January 2014, Japanese Prime Minister Shinzo Abe announced that the equivalent in ODA loans would be doubled from 1 to 2 billion dollars over the same five-year period.

3: “Yokohama Action Plan 2013–2017”

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